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Movie Gallery Files for Bankruptcy Protection

Debt-strapped video rental chain Movie Gallery said on Tuesday it filed for Chapter 11 bankruptcy protection in a move to slash debt by some $400 million and cut costs.

Dothan, Alabama-based Movie Gallery , the second-biggest video chain after Blockbuster, said it filed for bankruptcy in the Eastern District of Virginia.

It said it would seek court approval for a $150 million debtor-in-possession financing arranged by Goldman Sachs . It also said Sopris Capital Advisors agreed to invest $50 million in new capital into the company.

Movie Gallery said it expects to continue normal operations during the reorganization and that Canadian operations are not part of the Chapter 11 filing.